Apr 06,2021
Mill outages may squeeze US steel supply
2021-07-13
A slew of steel mill outages in the second quarter are expected to create additional supply issues in a US steel market already grappling with surging prices and tight supply.
Steelmakers Cleveland-Cliffs, NLMK, Nucor, US Steel and North Star BlueScope are all taking maintenance outages between April and June, according to market participants. Steelmakers generally take mid-year maintenance outages, but some of these are earlier and longer than usual.
As the economy recovers from last year's Covid 19-induced recession, demand from steel consuming sectors like automotive, appliances, and construction have driven the market, but low inventories at steel service centers have left many scrambling to find tons.
Steel capacity utilization rates in the US continue to track below pre-pandemic levels, with utilization rates at 77.6pc for the week ended 27 March compared to above 80pc prior to the pandemic, which hit the US full force in March 2020. Year-to-date production was at 21.4mn st for the last week in March compared to 22.7mn st during the same period a year prior.
Steel mill shutdowns in the second quarter of 2020 and aggressive inventory management by steel service centers led to a shortage of steel in the market in the second half of 2020 when demand ramped back up. But steelmakers, mainly integrated companies, were slow to bring production back online.
This led to a nearly tripling in pricing, from a low of $450/short ton (st) ex-works Midwest in mid-August to $1,330/st on 6 April.
The automotive, appliance and construction industries have been the main drivers behind steel demand. Automakers have been working overtime to replenish depleted inventories, while demand for appliances has skyrocketed, as people have found themselves with more disposable income as they were forced to stay at home.
The mill outages promise to add to supply-side issues, with many steelmakers already said to be running months behind on deliveries, according to market participants.
In April, electric arc furnace (EAF) minimill steelmaker North Star BlueScope will take a less-than-one-week outage of its hot-rolled coil (HRC) production at the 2.31mn short ton (st)/yr mill near Toledo, Ohio. North Star BlueScope is expected to take a second outage in June.
Integrated steelmaker Cleveland-Cliffs is expected to take a five-day outage at the hot strip mill at its Burns Harbor mill, east of Chicago, in April. The company is also expected to take a 45-60 day outage at its nearby Indiana Harbor East blast furnace No. 7, one of the largest facilities of its kind in North America, beginning in April.
In May, Cleveland-Cliffs is expected to take a 10-day outage at its hot strip mill at its Riverdale EAF steel mill in Chicago.
Integrated steelmaker US steel confirmed a 25-day outage in May for its No. 1 blast furnace at its Mon Valley Works south of Pittsburgh.
In June, the hot strip mills at Nucor's steel mills in Gallatin, Kentucky; Decatur, Alabama; and Hickman, Arkansas, will all take outages ranging from less than a week at Decatur to up to 14 days at Gallatin, according to market sources.
The hot strip mill at Nucor's Gallatin mill is also expected to take a 25-day outage from Thanksgiving to Christmas as part of the flat-rolled production expansion that facility has been undergoing.
Steelmaker NLMK USA will hold a one week outage in June at its Indiana flat-roll EAF for annual maintenance.
The Portage, Indiana, EAF has a capacity of 770,000 metric tonnes (t)/yr, while the rolling mill has a capacity of 1.2mn t/yr.
NLMK USA took the mill off line for most of June 2020 amid one of the weakest months for US steel production early in the Covid-19 pandemic.
By Rye Druzin
Source: Argus
